* Investors face triple threat: banks, inflation, slow
growth
* Bernanke sees downside risks to growth; upside to
inflation
* U.S. dollar stabilises after hitting record low vs euro
(Updates prices, adds European outlook)
By Kevin Plumberg
HONG KONG, July 16 (Reuters) - Asian stocks edged lower on
Wednesday as investors grew more pessimistic about the outlook
for global growth, clinging to the relative safety of U.S.
government debt and pushing oil below $138 a barrel.
European stocks were seen faring better, to open as much as
0.5 percent higher, according to financial bookmakers, as
energy prices eased.
Companies across the Asia Pacific region, such as Toyota
Motor Corp <7203.T>, the world's biggest car maker, and Huaneng
Power International <0902.HK>, China's top electricity
provider, have been lowering their sales and earnings forecasts
in the face of slower demand and higher costs.
Federal Reserve Chairman Ben Bernanke said that while the
likelihood is high that the U.S. economy would slow further,
the outlook for inflation had also intensified, providing
little comfort for investors and consumers struggling in
stagflationary conditions. []
Shares in the financial sector recovered somewhat though
unease about banks' balance sheets after the unveiling of a
U.S. bailout plan for top mortgage lenders Fannie Mae <FNM.N>
and Freddie Mac <FRE.N> remained a festering issue.
"The macro economy is now facing the prospect of the triple
shock of an extended credit crunch, high inflation and slowing
growth; the very three objectives central bank policy is
designed to overcome," said Sean Darby, chief Asia strategist
for Nomura in Hong Kong.
Japan's Nikkei share average <> ended the session
barely changed, after earlier touching a 3-1/2-month low.
Toyota cut its global sales target for 2008 by 3.6 percent,
largely to reflect a sharp U.S. slowdown, according to Japanese
broadcaster NHK, dragging the company's shares down 1.3 percent
and representing the extent to which sluggish growth in the
West has a domino effect on the rest of the world. []
The MSCI pan-Asia equity index <.MIAS00000PUS> was down 0.3
percent after earlier dipping to a two-year low. The Asia
Pacific ex-Japan index <.MSCIAPJ> was largely unchanged on the
day, though its year-to-date losses were 24 percent.
A CHILL IN CHINA
Hong Kong's Hang Seng index <> climbed 0.5 percent,
helped by investors buying back high profile company shares
that have been beaten down recently.
Huaneng Power stock fell 1.2 percent after the company on
Tuesday said it may post a loss for the first half of 2008
because of surging coal prices, which have smothered margins.
The Shanghai Composite index <> tumbled 3 percent,
with losses in the financial sector leading the way, as the
increasing possibility of a slowdown in the world's fastest
growing economy worried investors.
U.S. Treasury bond prices inched up Bernanke's comments
prompted investors to pare back expectations for an increase in
the U.S. benchmark interest rate this year, but wariness before
inflation data due later kept buying limited.
Benchmark 10-year notes <US10YT=RR> rose 2/32 in price to
yield 3.821 percent, down about 1 basis point from late U.S.
trade. Two-year notes <US2YT=RR> inched up 1/32 to yield 2.349
percent, dropping 4 basis points.
The U.S. dollar stabilised against the euro after hitting a
record low overnight on instability in the U.S. financial
sector.
A sharp drop in oil prices and comments from Bernanke
supported the dollar.
"Bernanke placed top priority in returning the U.S.
financial sector back to normal, which further pushed back rate
hike expectations," said Hideaki Inoue, chief manager of forex
trading at Mitsubishi UFJ Trust Bank in Tokyo.
"But the dollar was not sold as much as otherwise possible
thanks to the lower oil prices," Inoue said.
The euro was largely unchanged on the day at $1.5910 after
climbing to a high around $1.6040 <EUR=>. The dollar slipped
0.2 percent against the yen to trade at 104.40 yen <JPY=>.
Crude prices fell $1 to $137.74 a barrel <CLc1> after
tumbling 4.4 percent on Tuesday -- its biggest daily loss since
Jan. 17, 1991, when the United States began bombing Iraq in the
first Gulf war.
(Additional reporting by Shinichi Saoshiro in Tokyo; Editing
by Louise Heavens)
